Michelle Bachelet said on Sunday the government will stick to its rule of maintaining an average 1% budget surplus for every five-year period and will save a good portion of the mining profit for when copper prices are low again.

Sky-high prices for copper, which increased fivefold since 2003 before dropping last week, have handed Chile trade and budget surpluses of billions of dollars this year.

"The situation makes for enthusiasm but we also need to be prudent," Bachelet, who took office in March as Chile's first woman president, told MPs in a televised speech.

"We've seen the copper price rise and we also saw it fall 10% last week. Let's not fool ourselves, these high prices are surely temporary."

Chile, one of Latin America's most stable and prosperous countries, is known for its conservative fiscal policies and is the biggest copper producer in the world. State-owned Codelco is the world's biggest copper miner.

Offshore investments

Saving some of the foreign income in offshore investments will keep the local peso currency from over-appreciating, said Bachelet, whose centre-left coalition has been in power since 1990 and controls both houses of congress.

Bachelet, speaking in Valparaiso where congress is based, said her zeal for saving will not keep her from an ambitious social programme, including subsidised energy for the poor, better-equipped government clinics and housing loans.

Chile is one of Latin America's
most prosperous countries

She said that during her four-year term her government will create new environment and security ministries and focus on four main areas of "transformation," including:

  • Reforming Chile's private pension system, which is admired as a model abroad but is also considered expensive and leaves many Chileans without coverage.
  • Making a wider network of free pre-schools so that poorer children are not already behind when they start first grade, and improved secondary education.
  • Increasing public spending on research and development by 50% to stimulate innovation and development so that Chile exports not only metals and salmon, but things such as mining software and technologies for healthy fisheries.
  • Having friendly neighbourhoods, promoting safety and green areas as well as housing programmes.
  • Bachelet said: "If we continue to do things well we can soon reach income levels of a developed country."